A 2 trillion cheque is getting ready for the agriculture ministry

It is unclear if the government will announce an expansion of the schemes in the interim budget on 1 February, or in the first full budget of the next government after the general elections in May. (HT)
It is unclear if the government will announce an expansion of the schemes in the interim budget on 1 February, or in the first full budget of the next government after the general elections in May. (HT)

Summary

  • Expansion of income support, crop insurance scheme likely

NEW DELHI : The Union budget for 2024-25 may set aside 2 trillion for the agriculture ministry to help it expand the government’s flagship schemes on income support and crop insurance for farmers, two officials aware of the plans said. This will be a 39% increase in allocation for the ministry, which received 1.44 trillion in the 2023-24 budget. A bigger allocation may also help the ministry raise annual farmer income support from the current 6,000 to 9,000.

The Union ministry of agriculture and farmers’ welfare governs key schemes such as Pradhan Mantri Kisan Samman Nidhi (PM-Kisan) and Pradhan Mantri Fasal Bima Yojana (PMFBY). PM-Kisan, which completes five years in February, promises up to 6,000 every year for farmers as minimum income support, while PMFBY, which debuted in 2016, is a crop insurance scheme that allows farmers to pay only 1.5-5% of the premium depending on the crop and the harvest season. The balance premium is paid by the government.

 

PM-Kisan may get a 30% increase (from 60,000 crore allocated for 2023-24) and PMFBY may receive more than 17% higher allocation ( 13,625 crore for 2023-24), albeit the requirement is higher, the officials said on the condition of anonymity. The ministry’s crop division may also see higher allocation.

It is unclear if the government will announce an expansion of the schemes in the interim budget on 1 February, or in the first full budget of the next government after the general elections in May.

“Our budget requirement for PMFBY in FY25 is estimated at 18,000 crore, though we are expecting an allocation of 16,000 crore. However, it may change until the budget is announced, because we don’t yet know the rabi liability. We will get to know about it by 31 December and present it to the concerned authority," one of the two officials cited earlier said.

“Next year, we need a higher budget because of an increasing liability in three states, including Maharashtra, which contributes a third of the business. Maharashtra’s liability went up to 12,000 crore this year as against the past year’s 5,000 crore, while it was lower in some states.

Queries sent to the finance ministry’s expenditure department and the agriculture ministry remained unanswered at press time.

The government introduced several technological initiatives in the crop insurance scheme last year, including Yes-Tech, a yield estimation system; Winds, a weather information portal; and AIDE, a mobile app for farmer enrolments. According to the official cited earlier, technological intervention and universalization of the scheme have driven transparency in the system.

There’s a high possibility that the Centre will increase farmers’ income support to 9,000 per household from 6,000 now, the second official added. In that case, the allocation could be higher than 2023-24 by at least 30%, the official said.

“Typically, a 10% hike in budgetary allocation is given for agricultural and allied activities. A 10% hike in allocation is a regular feature and bare minimum. In an election year, the allocation is expected to be more. This year, it may cross 2 trillion because farmers are now the new caste. Though the department has given its proposal, the allocation will depend on other factors like prices of vegetables, whether new schemes are being introduced, etc." the official said.

Aditya Sesh, a member of the agriculture ministry’s expert committee, expects adjustments to the minimum support price (MSP) ahead, particularly in wheat and rice. “Schemes like Kisan Samman Nidhi are likely to undergo revisions to align with current market dynamics. There is also a likelihood of an upward revision in the allocation for crop insurance. If inflation experiences moderation, a plausible strategy may involve a judicious dilution of export curves to manage inflationary pressures by optimizing the availability of essential commodities within the domestic market. This is contingent upon a nuanced assessment of the inflationary landscape, allowing for a balanced trade-off between export ambitions and domestic price stability," said Sesh, who also heads Basiz Fund Service Pvt. Ltd.

“The overarching expectation is that the Union budget will reflect a measured approach, focusing on targeted interventions to address specific challenges within the agricultural sector, while maintaining overall stability in the allocation framework," Sesh added.

The ministry’s crop division may receive around 18,000 crore against 2023-24’s 17,000 crore as it will put a special focus on cluster planning; agro-ecological district and state-wise planning to ensure crop productivity; research towards millets, pulses and oilseeds over wheat and rice; new seed varieties; and district-wise seed planning, the first official said.

“Agriculture has made rapid progress, averaging around 4% (growth) on average. Yet, small farmers have a problem of subsistence. Farm producer organizations have at best a mixed record. While the interim budget might not contain major announcements, there has to be a long-term fiscal plan to address this. Besides, with the solid performance of agriculture, the infrastructure needed to become a long-term net exporter has to be put in place," said Abheek Baruah, chief economist at HDFC Bank.

“The focus is likely to be more on irrigation, crop insurance, and programmes and policies to increase agricultural productivity," said Devendra Pant, chief economist of India Ratings, adding he expects a 10-15% increase in agriculture budget in FY25.

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